by Andreea Kiss and Pamela Barr

In today’s increasingly competitive and dynamic global economy, organizations frequently face the need to simultaneously exploit their current competitive advantages and develop new advantages through significant innovation to address new markets and/or emerging but not yet fully understood demands from current markets. The capability to accomplish this complex objective has been termed organizational ambidexterity.

The achievement of organizational ambidexterity is difficult and places significant cognitive demands on the chief executives of organizations, who must be able to set organizational objectives, allocate resources, and evaluate performance outcomes across innovation activities targeting the preservation of advantages associated with current offerings through incremental changes (exploitative innovation), and those focused on the pursuit of new and emerging markets through exploratory innovation.

In our study, published in the Strategic Management Journal, we investigate the idea that CEO cognitive flexibility – the ability to switch between different modes of thinking, find workable solutions to seemingly conflicting problems, and combine and recombine knowledge gleaned from different sources in new ways – may be a cognitive characteristic with particular relevance to the challenges associated with simultaneously pursing exploitative and exploratory innovation.  Specifically, we looked at the influence of CEO cognitive flexibility on engagement in two types of information search activities associated with innovation, information search selection (where CEOs look for information) and information search intensity (effort and persistence), and the influence of those information search activities on organizational ambidexterity. We used three different methods and three different samples of individuals (202 CEOs of firms completing in technology-intensive industries in India, 123 US MBA students, and 58 US executives) to test these relationships.

We found that cognitively flexible CEOs are more likely to engage in effortful and persistent information search and rely to a greater extent on outside sources of information. In turn, effortful and persistent information search activities are associated with higher levels of organizational ambidexterity. We also found that where CEOs look for information (e.g., information that resides outside the organization) is less important for the achievement of organizational ambidexterity than how persistent and effortful their information search activities are. Interestingly, the size of the CEO effects uncovered is similar to or larger than other factors that have been previously shown to be meaningfully related to organizational ambidexterity, such as financial slack and prior performance, and CEO characteristics such as age and experience, suggesting that CEOs do indeed matter for innovation.

Our multiple-study approach, including an experiment, allowed us to better isolate the relationship between CEO cognitive flexibility and information search activities by accounting for alternative explanations, in particular those related to constructs that may be similar to cognitive flexibility such as mindfulness, self-efficacy, or emotional regulation. Further, by using samples of CEOs from both an emerging and a developed economy, we were able to partly address potential concerns related to the validity of the findings across cultures and economic settings.

Overall, our study adds to the evidence that the development of firm dynamic capabilities such as organizational ambidexterity and the implementation of an innovation-based strategy are influenced by human factors in the executive office. Our findings may be particularly relevant for CEOs and boards of firms competing in technology-intensive industries where multifaceted innovation is expected, but where the types of managerial capabilities needed to succeed, and their underlying mechanisms, are still unclear.

Reference:

Kiss A.N., Libaers, D., Barr, P.S.,  Tang, W.,  Zachary, M. (2020).CEO cognitive flexibility, information search, and organizational ambidexterity. Strategic Management Journal, https://onlinelibrary.wiley.com/doi/10.1002/smj.3192